Flipkart and Amazon prepare for sales in May, Soon After Lockdown

Flipkart and Amazon have asked their partnered brands and sellers to stock up for the post lockdown sales. They are expecting that many people are waiting to buy non-essential goods post lockdown. The demand for these non-essential goods is immensely high at the moment.

To cope up with the economic loss during the nationwide COVID-19 lockdown, Flipkart and Amazon have decided to put up mega online sales in May.

Flipkart and Amazon have asked their partnered brands and sellers to stock up for the post lockdown sales. They are expecting that many people are waiting to buy non-essential goods post lockdown. The demand for these non-essential goods is immensely high at the moment.

To avail the maximum benefit and recover from the loss of lockdown, they are planning to reduce the discounts.

Brands now know that, after the quarantine, customers will be looking for the availability of products rather than discounts. The new sales will not be based on cuts rather than they will be based on high demand.

Due to the Coronavirus pandemic, people are shifting to online platforms for buying groceries and other things. Therefore, a significant boost in E-commerce growth is expected.

Avneet Singh, chief executive of SPPL, which makes Kodak and Thomson smart televisions, said that e-commerce marketplaces have witnessed new consumers in the age group of mid-thirties are ordering products online for the first time. Singh believes that these new consumers will help boost online sales after the restrictions are lifted.

So far, Odisha is the state to allow all e-commerce platforms, such as Flipkart, Amazon, BigBasket, Grofers, Swiggy and Zomato, along with their third-party logistics partners, to resume operations during the second phase of the lockdown. Learning from Odisha, other states and central authorities are expected to take similar actions.

MSME lender Aye Finance raises Rs 233.6 crore in the Series D resulting into two fund raise in the same year

Aye Finance raised Rs 233.62 crore in a Series D equity round led by Falcon Edge Capital

We are privileged to have closed Series D funding within a year of the last equity round. The funds will help us continue the strong growth in lending to micro enterprises. Our enhanced focus on machine learning has benefited from the mentorship of Google Launchpad programme and this has enhanced our ability to create a transformative change for the excluded micro enterprises, said Sanjay Sharma, Managing Director, Aye Finance.

Aye Finance is a MSME lender and it raised Rs 233.62 crore in a Series D equity round led by Falcon Edge Capital, a New York based investment firm.

Within a year of raising money from CapitalG, Aye Finance raises Rs 233.6 Cr in Series D.

Other existing investors in Aye Finance like CapitalG, LGT and MAJ invest also participated in this Series D fund raise round.

Aye Finance was founded by Sanjay Sharma and Vikram Jetley in 2014. It has around 104 branches in 11 states and has served more than 1,00,000 micro enterprises. They have a loan book of over Rs 1,000 crore.



“The funds raised will be utilized to drive business growth and develop its technology and data mining capabilities”, said the company.

“We focused on MSME and SME lending as a significant yet under-served financing opportunity with healthy unit economics and a large, fragmented addressable market. We are pleased to partner with Aye Finance on this next leg of growth as they bring credit to India’s under-served MSMEs via a thoughtful and risk adjusted cluster-based approach.” said Navroz D. Udwadia, Co-Founder of Falcon Edge.

“Since our investment eight months ago, Aye has almost doubled its book and proven its ability to scale branches profitably. We are excited to continue to support the company to help them achieve their goal of extending credit to microenterprises.” said Kaushik Anand, Head of India Investments at Capital.





Japanese payments firms invest INR 50 Cr ($7 Mn) in India’s digital payment platform Instamojo

Bengaluru based company Instamojo raised INR 50 Cr ($7 Mn) in a Series B round of funding.

Businesses use Instamojo to instantly start, sell, manage and grow using our wide range of products & services like payments, free online store, logistics, credit & financing and more across the mobile & web. Briefly, Instamojo.com is a digital payments platform bundled with tons of e-commerce features to enable any business or individual to sell, manage & grow effortlessly, securely and cost-effectively.

Over 600,000 Indian businesses from 29 States and 7 Union Territories with 10+ million customers use Instamojo.

Bengaluru based company Instamojo raised INR 50 Cr ($7 Mn) in a Series B round of funding. It was led by existing Japanese investor AnyPay. The first-time investor was Gunosy Capital while the other existing investors included venture capital firms Kalaari Capital, Beenext, and angel investor Rashmi Kwatra.



“This funding will help us become the defacto fintech platform for MSMEs, rehashing our numbers. Having achieved most of the 2018 milestones, we have set new milestones for FY19. We are looking to grow 3X-5X, launching a slew of products under mojoExpress (logistics solutions) and mojoCapital (credit and lending). In the case of mojoCapital, we plan to achieve annualised disbursal run rate $100 Mn in the next 12 months against the existing $30 Mn.” sid Sampad Swain, CEO and co-founder, Instamojo.

In August last year, Instamojo launched mojoExpress and mojoCapital. While mojoExpress provides a logistics solution enabling delivery of products sold on its mojoEcommerce platform, mojoCapital provides credit and lending solutions to micro-merchants.

For deliveries, the company has already partnered with FedEx, Delhivery and Ecom Express and intends to add more soon.





DailyHunt raises $6 Million from Goldman Sachs as a part of Series E round

Bengaluru based news aggregator DailyHunt raised $6 million (INR 42 Crore) from Goldman Sachs investment partners.

Bengaluru based news aggregator “DailyHunt” run by Ver Se innovations Pvt. Ltd. raised $6 million (INR 42 Crore) from Goldman Sachs investment partners, which is a venture capital arm of New York-based investment bank Goldman Sach. The funding will be a part of Series E Round.

Earlier in 2015, it raised INR 250 Crore in Series C funding led by Falcon Edge Capital. In 2016, it raised INR 168 Crore in Series D funding round from Chinese content provider ByteDance.

DailyHunt was launched in 2009 by former Nokia Executive Umesh Kulkarni and Chandrashekhar Sohoni. It was formerly known as “NewsHunt” and was rebranded as “DailyHunt” in August 2015. It has 80 million users who spend 6 Billion minutes on the platform each month.



DailyHunt is available in 14 languages including English, Hindi, Marathi, Nepali, Gujarati. It provides original video content in Hindi and Telugu. It also provides free live TV stream service with more than 130 channels across 9 languages.

Major competitors of DailyHunt are UCNews, IShorts, NewsDog, Viralshorts. It’s latest offering is Newzly, a news excerpt mobile application that provides users with customized trending headlines in 9 languages.





Oppo makes first India investment with funding for digital firm POPxo

Digital media startup POPxo has raised Rs 37 crore.

Digital media startup POPxo has raised Rs 37 crore in a round led by South Korean company Doosan Corporation’s investment arm, Neoplux, and Chinese mobile company Oppo, which has made its first investment in the Indian market. Existing investors, including Japanese firm GREE Ventures, IDG Ventures India, Kalaari Capital and Philippines-based Summit Media, also participated in the round. The funds raised will be used for product development and to increasingly tap into vernacular markets.

“Oppo set the price for our investment round and has been one of our biggest clients prior to becoming an investor. We did a lot of their digital launches in India and Neoplux brings in Korean beauty brands,” Priyanka Gill, founder of POPxo, told ET.

The company plans to focus on enabling content commerce, where users will be able to purchase products via the portal, which will add to their existing monetisation plans. At present, over 50% of the company’s audience comes from individuals who live outside of the top seven metros in India.

“POPxo has been a key partner in our digital strategy in India. We are confident that POPxo will become a significant player in the e-commerce segment with their ability to create content at scale and drive user engagement,” said James Zheng, Oppo India investment manager.





Oyo gets a USD 250 mn infusion from Softbank to fight MakeMyTrip, others

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

Gurgaon based online hotel aggregation firm Oyo has raised a massive round of about USD 250 million led Softbank’s Vision Fund making it amply stashed with fresh cash to fight rivals MakeMyTrip, Yatra, ClearTrip, FabHotels and others.

Investment arm of automobile company Hero Enterprises and existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital also participated in the round.

The startup has so far raised about USD 442 million including this round.

Launched in 2013 by its 24-year old founder Ritesh Agarwal, OYO claims to be operating in more than 230 cities across India, Malaysia and Nepal.

It last raised around USD 62 million from existing investor Softbank in August 2016. Across India and Malaysia, Oyo claims to be operating over 70,000 rooms.

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

“OYO has solidified its position in India as the leading accommodation brand for consumer affordability and high quality standards. We’re excited to continue to support OYO as they further expand their position in India…and other markets around the world,” Justin Wilson, SoftBank’s Board representative on OYO said.

Also read: Ibibo Group founder and MakeMyTrip President Ashish Kashyap resigns

“As a business family, we have always set new paradigms; so OYO’s unique business model excites us. The differentiated thinking and ingenuity that Ritesh and his team bring to this industry gives us confidence that OYO can scale, innovate and set new benchmarks,” said Sunil Kant Munjal, Chairman of Hero Enterprises.



Speaking on the development Ritesh Agarwal, CEO of Oyo said that the company will deploy fresh capital to take its made-in-India business model to international markets. “These markets are characterized by a similar supply-demand imbalance in real-estate and hospitality,” Agarwal said.

The budget hotel accommodation market has heated up with activity in the last couple of years.

The online travel agency space last year witnessed the merger of the two big firms, MakeMyTrip and GoIbibo.

Previously, the companies had also delisted Oyo from their platform citing conflict of interest. Earlier this month, another start-up in the budget hotel space, Treebo too delisted itself citing issues high commissions.

Oyo’s rival MakeMyTrip is trying to strengthen its own budget hotel segment and had launched ValuePlus in 2015. On the other hand, GoIbibo had also launched GoStays.

Also read: Man behind OYO Rooms : Ritesh Agarwal

In an interaction with Moneycontrol recently, MMT chief executive Rajesh Magow said that the company is targeting the hotels and packages segment to contribute at least 70-75 percent of its revenue in the next 3-4 years, expressing its aggressiveness on the accommodation market.

MMT currently gets 54 percent of the business from hotel and packages and 46 percent from flights.

Besides MakeMyTrip, Oyo has smaller rivals such as Treebo Hotels that raised USD 34 million in Series C round led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital, just last month.

Also read: Online hotel aggregator Treebo Hotels secures Series C funding





Online hotel aggregator Treebo Hotels secures Series C funding

Treebo Hotels, a Bangalore-based online budget hotel aggregator has raised $34 Million (Rs 220 crore) in its Series C funding.

Treebo Hotels, a Bangalore-based online budget hotel aggregator has raised $34 Million (Rs 220 crore) in its Series C funding round led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital. Existing investors, SAIF Partners, Matrix Partners India, and Bertelsmann India Investments also participated in the round.

Treebo said in a statement that it will invest the fresh funds into enhancing customer experience, building a stronger brand, strengthening its technology team, and expanding its footprint in existing and new cities. The platform currently has close to 300 franchisees operating under its brand across in about 50 cities.

Treebo’s previous funding

With this round the company has raised a total of $57M in three rounds from multiple investors:

Series B: In July last year, Treebo secured funding of Rs 112 crore (~$16.7M) and said that it will use the funding for expand to more than 60 cities and increasing its inventory 12,000 rooms. It said that it plans to launch a product extension including mid scale and leisure rooms, expanding from its current portfolio of budget rooms.

Series A: In June 2015, Treebo raised around $6 million in funding from SAIF and Matrix.

The company was started in the same year by former Myntra executives Siddharth Gupta and Rahul Chaudhary, along with Kadam Jeet Jain.

Competition

Treebo competes with numerous place in budget hotel space, which include OYO Rooms, FabHotels, MakeMyTrip – GoIbibo, Paytm, Booking.com, Hotels.com, Yatra, Airbnb, and others to name a few.

Last month, Gurgaon-based online budget hotel aggregator FabHotels secured Series B funding of $25 million from Goldman Sachs and Accel Partners. With the fresh funding, the company is looking to double the number of hotel rooms on its platforms, and strengthen its presence in select cities.

In June, Airbnb tied-up with Maharashtra Tourism Development Corporation (MTDC) to list MTDC home stays on its platform. It also had signed a MoU with Self-Employed Women’s Association of India (SEWA) to expand its network of homes in rural India, in November last year.

In May, OYO Rooms also forayed into hotel chain segment. Also, OYO Rooms is reported to close its second round of funding of $250 million from Softbank soon.





Five things every investor looks for in a startup

Here are a few things investors seek in start-ups while taking the decision of investing.

For an investor, it is important to know what he’s getting into while taking a decision of investing in a company. No one wants to invest in a business which isn’t profitable and viable in the future.

Here are a few things investors seek in start-ups while taking the decision of investing:

A strong team

An investor looks at a start-up as a team which works together and not as a one-man show. The management team’s capabilities and history is very crucial for an investor because it helps him assess what the team is capable of doing in the future.

You might portray a very colourful image of your team but if an investor can break through the rosy portrayal and see the rifts and lack of unity in the team, he might not invest in your start-up even though he liked the idea.

Hence, it is crucial to have a strong founding team in which everyone is sure about their roles and responsibilities.

Related Post: How to form the right startup team

The business plan

The investor doesn’t know everything about your business so you need to let him know about the most important things like the break-even point, financial plan and the marketing and sales plan through your business plan. Because your business plan is a major factor the investor judges you upon, make sure it is made properly and consists of all relevant and required details.

Also, try charting milestones so that an investor has a better idea of your business.

Related Post: All you ever wanted to know about a business plan



Company’s uniqueness

If your idea is the same as the one being offered in the market, an investor will not be interested in investing in your business. He is looking for a unique idea which will appeal to the customers and give him enough profits. VCs often look for competitive advantage and propriety features over the financial structure.

For instance, the most unique ideas are often sponsored in Shark Tank over ideas which are done and dusted with already.

Related Post: Meeting with Investors – Before, During and After

Effective long-term Business Model

A start-up might be doing extremely well in the initial stages and making profits but what is important to judge is whether the business will survive in the future as well. A number of companies are closing down due to mismanagement of finances, low sales, no profits etc.

Amidst cut-throat competition, all an investor wants to know is if your business is likely to withstand the test of time and continue doing well in the future.

Related Post: 7 ways to build a successful startup revenue model

Growth potential

It isn’t enough to be a sustainable business; the company must also have growth potential because no one wants to invest in a company which is standard and stagnant in terms of profits. Your company should be able to growth at a fast pace and introduce new products and services to the mix and attract more markets in a short time. A potential market size is a great way of determining the potential growth rate in the future.





These angel investors could help you make your idea bigger

Here are a few angel investors who might be interested in financing your idea.

Setting up your own venture requires capital and Venture Capitalists are not always supportive or appreciative of your idea which is why you can approach angel investors in India. We have got you a list of the most popular and sought after angel investors in the country.

Here are a few angel investors who might be interested in financing your idea:

Rajan Anandan

Rajan Anandan is the managing director of Google India and has been financing projects since 2006. He invests mostly in projects which are e-commerce or cloud-based.

Sanjay Mehta

He is a very active member of the popular angel investment groups like India Angel Network, Mumbai Angels and Venture Nursery. Till now, he has invested in almost 50 start-ups which mostly deal with big data and consumer services.

Related Post: Meeting with Investors – Before, During and After

Zishaan Hayath

He started his series of angel investments with Ola, a cab-booking service. He also founded the Powai Lake Ventures and has funded more than 30 ventures till now.



Sunil Kalra

He is the founding member of University of Petroleum and Energy Sciences, Dehradun and an active member of India Angel Network. His affair with funding start-ups began way back in 2002 and he has financed more than 50 ventures till now.

TV Mohandas Pal

The ex CFO of Infosys is currently an active angel investor who has made almost 40 investments in ideas so far. He is also the chairman of Manipal Global Services which manages the Manipal campuses in Malaysia, Dubai and Nepal.

Related Post: 4 Qualities angel investors want to see in startups

Rehan Khan

He is the founder of Orios Venture Partners which is an investment agency and has made over 20 investments so far. The areas Khan makes most investments in are mobile technology and e-commerce.

Sharad Sharma

He was formerly heading the R&D sector of Yahoo India and founded the think tank called iSPIRIT. He makes his investments if he thinks an idea is attractive enough to capture the software industry.

We hope this makes your process of finding an angel investor easier!





Reasons budding entrepreneurs should stop looking for venture capital

Here are seven reasons for budding entrepreneurs to give up the hunt for venture capital and angel investors.

Every year, about millions of new businesses are started, and fewer than one percent successfully raise venture capital (VC).

Whether it’s the feeling of acceptance into this elite club, or the misconception that it’s impossible to start a new business without millions in capital, many startup founders find themselves hypnotized by the pursuit of VCs and angel investors.

Perhaps the adage is true: We want what we can’t have. And yet it can be argued that your chances of success are greater if you stop looking for VC money and focus your energy on bootstrapping your business and attracting customers.

Here are seven reasons for budding entrepreneurs to give up the hunt for venture capital and angel investors:

1. You haven’t proven your market need

Sure, you’ve put together a pitch deck, business plan and financial projections, but those are all just that — projections. You’re basing the future success of your company solely on hypotheticals.

Before looking for VCs, prove that there are customers out there who want what you’re selling. Spend time talking to your users, and focus on giving them what they want. Invest your time in finding a place in the market before trying to convince investors to give you their money.

2. You lose control

Once you secure VCs, you’re at their mercy. Even if you maintain a majority stake, you’re giving up a percentage of equity, profits and control to a board that may have a different vision for your company than you do.

In most cases, your VCs will ask for one or more board seats giving them the right to vote on or veto key decisions that will directly affect the future of your company. These same people also have the right to fire you or members of your team, which means you could be ejected from the company you started.

3. You’re focused on the investor – not on your customer

Giving up control means you have a new responsibility. Your first priority is no longer to your customer, because your investors expect to come first. Among other conditions that are negotiated in a deal, venture capitalists can ask for anti-dilution protection, dividends, liquidation preferences, mandatory redemption and other perks that the founding partners may not even get the rights to.

In some extreme cases, VCs have the right to sue you for everything you own in the case you forget to tell them “bad news,” according to Bloomberg Business.



4. Instead of trying to make money, you’re trying to raise it

The irony of trying to raise venture capital is how much time you waste chasing down investors – when you could be chasing down customers. There are only so many hours in a day and only so much work you and your team members can take on. Every minute you spend chasing down a flippant VC is a minute you’re not working on creating a great business.

That’s all to say you’re putting a lot of your eggs into a basket that the statistics say you’ll never obtain.

5. Your burn rate is higher than if you were to bootstrap

What’s a burn rate? It’s the amount at which a company spends money, especially venture capital, in excess of income.

You may know the now viral story of CEO Maren Kate and the downfall of her company, Zirtual. She abruptly shut down all operations due to a glitch in the books that was overlooked. Basically, the company did not have a handle on its burn rate – and it ran out of money. This also supports the next point that…

6. You lose the hustle required in running a lean business

When playing with someone else’s money, many startup founders admit that it becomes less real. It’s harder to stay lean and savvy with the false impression that you’re rolling in the dough.

Investor and entrepreneur Gary Vaynerchuk writes: “Twenty-five to 50 percent of all the businesses I have ever looked at were more than capable of being a little scrappier.”

7. Your end goal is focused on an exit rather than building a company that will last

If your end game is growth over profit, then you are forever stuck in a cycle of having to raise more money. As soon as you’re no longer able to secure more from VCs, then your company will likely implode.

You’re relying on other people’s belief in you – based on hypothetical projections – rather than relying on a solid business model that turns profits and creates happy customers.

Author: Shannon Whitehead

Shannon Whitehead is the founder of Factory45, an online accelerator program that takes sustainable apparel companies from idea to launch — without raising venture capital. Committed to improving the fashion industry, Whitehead launched what was at the time the most successful fashion project on Kickstarter and now helps other fashion entrepreneurs bring their ideas to market.

Image credit: www.fortunebuilders.com

This article was originally published in Entrepreneur.com



How funding works – Splitting the equity pie with investors

The basic idea behind equity is the splitting of a pie. When you start something, your pie is really small. You have a 100% of a really small, bite-size pie. When you take outside investment and your company grows, your pie becomes bigger.

A hypothetical startup will get about $15,000 from family and friends, about $200,000 from an angel investor three months later, and about $2 Million from a VC another six months later. If all goes well. See how funding works in this infographic:



First, let’s figure out why we are talking about funding as something you need to do. This is not a given. The opposite of funding is “bootstrapping,” the process of funding a startup through your own savings. There are a few companies that bootstrapped for a while until taking investment, like MailChimp and AirBnB.

If you know the basics of how funding works, skim to the end. In this article I am giving the easiest to understand explanation of the process. Let’s start with the basics.

Every time you get funding, you give up a piece of your company. The more funding you get, the more company you give up. That ‘piece of company’ is ‘equity.’ Everyone you give it to becomes a co-owner of your company.

Splitting The Pie

The basic idea behind equity is the splitting of a pie. When you start something, your pie is really small. You have a 100% of a really small, bite-size pie. When you take outside investment and your company grows, your pie becomes bigger. Your slice of the bigger pie will be bigger than your initial bite-size pie.

When Google went public, Larry and Sergey had about 15% of the pie, each. But that 15% was a small slice of a really big pie.

Funding Stages

Let’s look at how a hypothetical startup would get funding.

Idea stage

At first it is just you. You are pretty brilliant, and out of the many ideas you have had, you finally decide that this is the one. You start working on it. The moment you started working, you started creating value. That value will translate into equity later, but since you own 100% of it now, and you are the only person in your still unregistered company, you are not even thinking about equity yet.

Co-Founder Stage

As you start to transform your idea into a physical prototype you realize that it is taking you longer (it almost always does.) You know you could really use another person’s skills. So you look for a co-founder. You find someone who is both enthusiastic and smart. You work together for a couple of days on your idea, and you see that she is adding a lot of value. So you offer them to become a co-founder. But you can’t pay her any money (and if you could, she would become an employee, not a co-founder), so you offer equity in exchange for work (sweat equity.) But how much should you give? 20% – too little? 40%? After all it is YOUR idea that even made this startup happen. But then you realize that your startup is worth practically nothing at this point, and your co-founder is taking a huge risk on it. You also realize that since she will do half of the work, she should get the same as you – 50%. Otherwise, she might be less motivated than you. A true partnership is based on respect. Respect is based on fairness. Anything less than fairness will fall apart eventually. And you want this thing to last. So you give your co-founder 50%.

Soon you realize that the two of you have been eating Ramen noodles three times a day. You need funding. You would prefer to go straight to a VC, but so far you don’t think you have enough of a working product to show, so you start looking at other options.



The Family and Friends Round: You think of putting an ad in the newspaper saying, “Startup investment opportunity.” But your lawyer friend tells you that would violate securities laws. Now you are a “private company,” and asking for money from “the public,” that is people you don’t know would be a “public solicitation,” which is illegal for private companies. So who can you take money from?

  1. Accredited investors – People who either have $1 Million in the bank or make $200,000 annually. They are the “sophisticated investors” – that is people who the government thinks are smart enough to decide whether to invest in an ultra-risky company, like yours. What if you don’t know anyone with $1 Million? You are in luck, because there is an exception – friends and family.
  2. Family and Friends – Even if your family and friends are not as rich as an investor, you can still accept their cash. That is what you decide to do, since your co-founder has a rich uncle. You give him 5% of the company in exchange for $15,000 cash. Now you can afford room and ramen for another 6 months while building your prototype.

Registering the Company

To give uncle the 5%, you registered the company, either though an online service like LegalZoom ($400), or through a lawyer friend (0$-$2,000). You issued some common stock, gave 5% to uncle and set aside 20% for your future employees – that is the ‘option pool.’ (You did this because 1. Future investors will want an option pool;, 2. That stock is safe from you and your co-founders doing anything with it.)

The Angel Round

With uncle’s cash in pocket and 6 months before it runs out, you realize that you need to start looking for your next funding source right now. If you run out of money, your startup dies. So you look at the options:

  1. Incubators, accelerators, and “excubators” – these places often provide cash, working space, and advisors. The cash is tight – about $25,000 (for 5 to 10% of the company.) Some advisors are better than cash, like Paul Graham at Y Combinator.
  2. Angels – in 2013 (Q1) the average angel round was $600,000 (from the HALO report). That’s the good news. The bad news is that angels were giving that money to companies that they valued at $2.5 million. So, now you have to ask if you are worth $2.5 million. How do you know? Make your best case. Let’s say it is still early days for you, and your working prototype is not that far along. You find an angel who looks at what you have and thinks that it is worth $1 million. He agrees to invest $200,000.

Now let’s count what percentage of the company you will give to the angel. Not 20%. We have to add the ‘pre-money valuation’ (how much the company is worth before new money comes in) and the investment

$1,000,000 + $200,000= $1,200,000 post-money valuation

(Think of it like this, first you take the money, then you give the shares. If you gave the shares before you added the angel’s investment, you would be dividing what was there before the angel joined. )

Now divide the investment by the post-money valuation $200,000/$1,200,000=1/6= 16.7%

The angel gets 16.7% of the company, or 1/6.

How Funding Works – Cutting the Pie

What about you, your co-founder and uncle? How much do you have left? All of your stakes will be diluted by 1/6. (See the infographic.)

Is dilution bad? No, because your pie is getting bigger with each investment. But, yes, dilution is bad, because you are losing control of your company. So what should you do? Take investment only when it is necessary. Only take money from people you respect. (There are other ways, like buying shares back from employees or the public, but that is further down the road.)



Venture Capital Round

Finally, you have built your first version and you have traction with users. You approach VCs. How much can VCs give you? They invest north of $500,000. Let’s say the VC values what you have now at $4 million. Again, that is your pre-money valuation. He says he wants to invest $2 Million. The math is the same as in the angel round. The VC gets 33.3% of your company. Now it’s his company, too, though.

Your first VC round is your series A. Now you can go on to have series B,C – at some point either of the three things will happen to you. Either you will run out of funding and no one will want to invest, so you die. Or, you get enough funding to build something a bigger company wants to buy, and they acquire you. Or, you do so well that, after many rounds of funding, you decide to go public.

Why Companies Go Public?

There are two basic reasons. Technically an IPO is just another way to raise money, but this time from millions of regular people. Through an IPO a company can sell stocks on the stock market and anyone can buy them. Since anyone can buy you can likely sell a lot of stock right away rather than go to individual investors and ask them to invest. So it sounds like an easier way to get money.

There is another reason to IPO. All those people who have invested in your company so far, including you, are holding the so-called ‘restricted stock’ – basically this is stock that you can’t simply go and sell for cash. Why? Because this is stock of a company that has not been so-to-say “verified by the government,” which is what the IPO process does. Unless the government sees your IPO paperwork, you might as well be selling snake oil, for all people know. So, the government thinks it is not safe to let regular people to invest in such companies. (Of course, that automatically precludes the poor from making high-return investments. But that is another story.) The people who have invested so far want to finally convert or sell their restricted stock and get cash or unrestricted stock, which is almost as good as cash. This is a liquidity event – when what you have becomes easily convertible into cash.

There is another group of people that really want you to IPO. The investment bankers, like Goldman Sachs and Morgan Stanley, to name the most famous ones. They will give you a call and ask to be your lead underwriter – the bank that prepares your IPO paperwork and calls up wealthy clients to sell them your stock. Why are the bankers so eager? Because they get 7% of all the money you raise in the IPO. In this infographic your startup raised $235,000,000 in the IPO – 7% of that is about $16.5 million (for two or three weeks of work for a team of 12 bankers). As you see, it is a win-win for all.

Being an Early Employee at a Startup

Last but not least, some of your “sweat equity” investors were the early employees who took stock in exchange for working at low salaries and living with the risk that your startup might fold. At the IPO it is their cash-out day.

This article was originally published in Funders and Founders

Image credit: saascribe.com



Startup Success: Pitch Your Business Idea Like a Pro

Everyone has ideas; it is the implementation which makes the difference. So when working upon making an idea a reality apart from working on the basic business plan, you need to pitch your idea to an investor.

We all have ideas. But how many of us actually do something with our ideas. So how do you end up making an idea a reality?

Everyone has ideas; it is the implementation which makes the difference. So when working upon making an idea a reality apart from working on the basic business plan, you need to pitch your idea to an investor.

Not all of us our blessed with cash rich heritage and are dependent on external investments to get funds into our startups. What may look good on paper needs to be reflected in a summary form so that the investor gets the idea immediately instead of having to look into a cumbersome booklet, which states every morose detail.

There is no point having an elaborate slide or presentation unless you actually have something which is concrete and tangible. No investor wants to invest in an idea which has no base. You cannot simply talk about your business and why you need the money alone, you need to pitch in your idea, which showcases the actual concept which people will get.

If you cannot make the investor understand, then the investor will think the concept shall also be lost on the mass. You need to show your business viability. Why would anyone invest their money if the business which is not viable?

Have a prototype and a test launch of your product. This helps the investor understand the actual reality of your idea. Remember one thing, when you are going to investors, you are going to people who know their business.

So never beat around the bush and waste the investor’s time. Get to the point and be reasonable and sensible. If Rome was not built in a day, then remember neither will be your business.



Fundraising 101: Checklist for Entrepreneurs

When raising funds for your entrepreneurial ventures, just follow this easy checklist to ensure you never forget the important steps again.

It’s easy to get lost in the whirlwind of raising funds for your business ventures. There’s so much to learn and process in a short space of time.

But don’t worry.

When raising funds for your entrepreneurial ventures, just follow this easy checklist to ensure you never forget the important steps again.

  • Do your homework.

Learn about the people you want around your business – those you want as business associates, those that can help you in your field and those businesses that rival yours. What can you do that will draw them to your business and you as an entrepreneur before others? Can you size up your competition early on and get ahead of the game?



  • Write your proposals for pitching to investors.

Once you have done your research and you know which people are available to invest in you and your business, you should write your pitch to target them specifically. Know your audience and how to handle them.

  • Build relationships.

Potential investors should know that the business you propose to carry out is a winner – but also that the person carrying it out with their investment money is willing and fully able to do what is necessary to build the business.

  • Reap the benefits.

Now that you’ve done all the grafting, it’s time to actually bring in your hard earned funds from your fundraising!

Whether you’re raising your funds from family and friends, big business investors or even crowd funding, you never have to miss a step again.



Four important facts while evaluating an offer for funding

If you build something that’s promising, you’ll find lots of potential investors and many doors will be open for you. But before taking big actions, it’s best to keep the following considerations in mind.

If you build something that’s promising, you’ll find lots of potential investors and many doors will be open for you. But before taking big actions, it’s best to keep the following considerations in mind.

Valuation of the Advices You Get is Key

It is really critical to work with experts in your specific industry. You have to be picky when it comes to taking advices. Knowing the right people has been invaluable every step of the way.

Your Story Is Important

Accepting an investment is a landmark event in the history of your organization. Your selections will show the world what kind of company you aspire to be. This selections are being watched and by, customers, competitors and even inside your organization. Stay aware of your own story and let it become your great strength.

You Must Know Your Partners

Consider each investor opportunity carefully. You must know what is important for you, what the key factors are for your company. Do you need a brand name, do you need control or do you need more cash reserves for example… Ask questions to your potential investor. Your relationship will need trust, so the questions and answers are important.

You Can Be Successful At Any Size

The goal of every company doesn’t have to be bigger and better. A spark can become an out-of-control wildfire without the right supervision. Commitment to responsibility and knowing the capabilities of your organization is maybe the most important, and frequently overlooked aspect of accepting investment. So be careful and don’t get ahead of yourself.

Image Credit: silverlaw.com



SoftBank investors ask for internal probe of its President and COO Nikesh Arora

The American law firm Boies Schiller & Flexner sent a request letter to SoftBank’s board dated Jan. 20, asking to investigate Nikesh Arora’s qualifications and track record as president of the firm.

After Sequoia, now Tokyo-based venture firm SoftBank is entangled in trouble but well for different reasons of course.

The American law firm Boies Schiller & Flexner sent a request letter to SoftBank’s board dated Jan. 20, asking to investigate Nikesh Arora’s qualifications and track record as president of the firm.

Also one of Sprint Corp’s investor which is managed by SoftBank, sent a letter to the venture firm asking Nikesh Arora’s removal as President, reports Bloomberg.

Nikesh Arora’s advisory role to the private equity firm Silver Lake has raised questions about his conflict of interests and suggests past wrongdoings and incompetent business decisions. The letter also says that Arora is getting compensated by Silver Lake for helping with potential technology company investments which he is supposed to be closing for SoftBank.

The investors have asked for an internal investigation by an independent firm.

Matthew Schwartz, a partner at Boies Schiller & Flexner, in the letter wrote, “Poor investment performance and a series of questionable transactions during his tenure. Despite these issues, the SoftBank board saw fit to make Mr. Arora the third-highest paid executive in the world without any track record of accomplishment at the company.”

SoftBank has denied to Bloomberg and called the letter “unsubstantiated allegations” from “unidentified shareholders.” The firm has strongly backed Arora and said it is completely aware of his involvement with Silver Lake.

Nikesh Arora had earlier worked with Google and had exited the company as chief business officer. Then in 2007, he joined Silver Lake but has clarified that his involvement with the firm has been ‘minimal’ since he joined SoftBank in 2014.

Image credit: www.bloomberg.com



Key checklist that Askme considers before investing in any startup

Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.

Piyush Pankaj, VP Corporate Finance and M&A at Askme Group, speaks about what are the key checklist that the company considers before investing in a company.

Askme, majorly owned by Malaysia’s Astro Holdings, invested a whooping $20 million in Indian online market place Mebelkart last year, in turn for a stake in the company. The company also acquired online grocery marketplace BestAtLowest.com for $10 million in 2015.

The key factors checked before a partnership or funding

Piyush said that the two main criteria that the group seeks are the synergy opportunities the startup has with the Askme Group and entrepreneurial skills of the team or the founder. Once these two main requisites are checked, then the Askme looks for other qualities like market opportunity and others.

When a startup begins operations, they have very limited resources. So the first thing we do is to keep the resources so that they can rapidly grow. We focus on how the company can further grow using the Askme ecosystem and how Askme’s gross users can generate revenue for the startup.

One of the challenges that we face is to integrate Askme’s philosophy and culture in the startup and at the same time create an environment where the startup continues to develop and innovate fresh ideas with complete freedom.

When a founder approaches us they should keep in mind whether they will be able to create any synergies with the Askme Group. We have the ability to incubate in our area — the online ecommerce, hyperlocal and penetration into the SMEs and bigger markets. So whoever comes with their idea, they should keep in mind if the idea matches our ecosystem and of possible synergies. The founders should have a clear idea as to how they can help grow our business or how they themselves could grow their startup using our platform.



What made Askme to invest in Mebelkart?

The idea of Mebelkart really appealed to us, as the concept of online furniture business has a lot of growth opportunities in India. The online business mostly caters to the metro cities. What Askme can provide to them is penetration into tier 2 and 3 cities.

Our main idea was to help Mebelkart rapidly grow using the Askme ecosystem. We also looked at the promoters, who come from a good IIT background, and have successfully created a sound technology platform which is very scalable. We have also seen a great amount of hunger in their team for success which made this decision come easy.

When Mebelkart approached us they had done their research on how we can help them and what are the opportunities that we could provide.

Ecommerce space can benefit from Chinese investments

The whole ecommerce industry is still at a nascent stage and penetration into the smaller cities is not up to the mark. The ecommerce industry still requires a lot of investment to help it penetrate into smaller cities. So with the Chinese investments coming and the new FDI norms, it is going to help the ecommerce industry, especially the startups.

Currently the whole ecommerce space is led by mobile and apparel categories, all other categories continue to remain at a very nascent stage. So wherever there are more hyperlocal businesses coming to the play, those startups are going to get benefitted because the market is moving towards these new distribution models.  Right now in the grocery domain, a lot of categories can penetrate into the hyperlocal model. The closer one gets to the consumer the better it is.

Lower funding in 2016 should improve quality

Money is drying up because everyone today is looking for profitability. On an industry basis, I think it’s good for the overall space as people will now stop giving several of those discounts, which the government also has tried to control via FDI rules. This will make a semblance for every player as it will make it a levelled play for everyone rather than giving the upper hand to those who were funded previously. It will help clear off the euphoria and let real businesses to emerge. People will focus on quality rather than quantity.

This article was originally published in Entrepreneur.com



Investments in Indian startups are back and how!

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

Here is some cheer for startups this year after funding slowed down significantly in the last quarter of 2015. According to a report by venture capital and startup research firm Xeler, Indian startups raised $1.73 billion during January-March 2016.

Compared with just 114 deals during the three months ended December 2015, there were 344 investments during January-March 2016. As many as 388 startups raised funds in the first three months of 2016.

The largest funding rounds during the first three months of 2016 were by online travel venture Ibibo ($250 million), e-commerce major Snapdeal ($200 million), online grocery retailer Big Basket ($150 million), online automobile classified portal Cartrade.com ($145 million) and online retailer Shopclues ($75 million).



“On an average, we have seen at least 4 startup fundings per day between January to march 2016,” Xeler said in a report. Read full report here.

eCommerce, SaaS and health tech have emerged as the top performing investment segements this quarter with a cumulative investment of over USD 810mn across 103 startups that accounts for 47% of the cumulative deal value.

Image credit: www.livemint.com